Saturday, May 17, 2008

In 1922, according to internal General Motors files, Alfred P. Sloan, Jr., the MIT-trained genius behind GM established a special unit within the corporation which was charged, among other things, with the task of replacing America’s electric railways with cars, trucks and buses.

A year earlier, in 1921, GM lost $65 million, leading Sloan to conclude that the auto market was saturated, that those who desired cars already owned them, and that the only way to increase GM’s sales and restore its profitability was by eliminating its principal rival: electric railways.

At the time, 90 percent of all trips were by rail, chiefly electric rail; only one in 10 Americans owned an automobile. There were 1,200 separate electric street and interurban railways, a thriving and profitable industry with 44,000 miles of track, 300,000 employees, 15 billion annual passengers, and $1 billion in income. Virtually every city and town in America of more than 2,500 people had its own electric rail system.

Together with Firestone Tire, Standard Oil of California and Phillips Petroleum, General Motors formed the National City Lines (NCL) holding company, which acquired most streetcar systems throughout the United States, dismantled them, and replaced them with buses in the mid 20th century.

Convicted of violating the Sherman Antitrust Act, GM was fined $5,000 and each executive was ordered to pay a nominal fine of $1 for a conspiracy to force the streetcar systems to buy GM buses instead of other buses (but not for dismantling the streetcar systems, which were also being dismantled by non-NCL owned systems).